UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FormFORM 20-F

ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year endedMarch 31, 20002002
Commission file number1 - 67841-6784

MATSUSHITA DENKI SANGYO KABUSHIKI KAISHA
(Exact name of registrantRegistrant as specified in its charter)

MATSUSHITA ELECTRIC INDUSTRIAL CO., LTD.
(Translation of registrant’sRegistrant’s name into English)

Japan
(Jurisdiction of incorporation or organization)

1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan
(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

*
*              American Depositary Shares evidenced by American Depositary Receipts.                 Each American Depositary Share represents ten sharesone share of Common Stock.
**		Par value 50 Japanese yen per share.

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

(Title of Class)

None

Securities for which there is a reporting obligation pursuant
to Section 15(d) of the Act.

None

(Title of Class)

None

This form contains 87125 pages.

CONTENTS

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Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [  ].

Indicate by check mark which financial statement item the Company has elected to follow.

Item 17. [X] Item 18. [  ].

All information contained in this Report is as of March 31, 20002002 or for the year ended March 31, 20002002 (fiscal 2000)2002) unless the context otherwise indicates.

The noon buying rate for yen in New York City as certified for customs purposes by the Federal Reserve Bank of New York on July 17, 20008, 2002 was 108.53118.66 yen = U.S.$1.

Cautionary Statement Regarding Forward-Looking Statements

AnyThis annual report includes forward–looking statements with respect to Matsushita’s current plans, estimates, strategies(within the meaning of Section 27A of the U.S. Securities Act of 1933 and beliefs in this Annual Report, other than thoseSection 21E of historical fact, are forward-looking statementsthe U.S. Securities Exchange Act of 1934) about the future performance of Matsushita and its Groupgroup companies which(the Matsushita Group). To the extent that statements in this annual report do not relate to historical or current facts, they constitute forward-looking statements. These forward-looking statements are based on management’sthe current assumptions and beliefs of the Matsushita Group in light of the information currently available to it, and involve known and unknown risks, uncertainties, and uncertainties. Actual eventsother factors. Such risks, uncertainties and other factors may cause the Matsushita Group’s actual results, may differperformance, achievements or financial position to be materially different from those anticipatedany future results, performance, achievements or financial position expressed or implied by these forward-looking statements. Matsushita undertakes no obligation to publicly update any forward-looking statements after the date of this annual report (July 2002). Investors are advised to consult any further disclosures by Matsushita in these statements.its subsequent filings with the U.S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934 and its other filings.

Potential

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The risks, uncertainties and uncertaintiesother factors referred to above include, but are not limited to, economic conditions, such asparticularly consumer spending and privatecorporate capital expenditures; trendsexpenditures in major economies in the world, including Japan, the United States, Europe, Japan and other Asian countries; volatility in demand for electronic equipment and components from business and industrial customers, as well as consumers in many product and geographical markets; currency exchange rate fluctuations, notably between the yen, the U.S. dollar, the euro,Euro, Asian currencies and other currencies in which the Matsushita Group operates its businessbusinesses, or in which Matsushita’s assets and liabilities of the Matsushita Group are denominated; direct and indirect restrictions imposed by other countries; fluctuations in market pricesthe ability of securities in whichthe Matsushita has holdings; and Matsushita’s ability to maintain its strength in many product and geographical areas, and Matsushita’s abilityGroup to respond to rapid technological changes through such means asand changing consumer preferences with timely and cost-effective introductions of new product introductions,products in a marketmarkets that isare highly competitive in terms of both price and technology, which is characteristictechnology; the ability of the industryMatsushita Group to realize expected benefits of various restructuring activities in its business and organization, including the share exchanges with five subsidiaries currently in progress; the ability of the Matsushita Group to achieve its business objectives through joint ventures and other collaborative agreements with other companies; the ability of the Matsushita Group to maintain competitive strength in many product and geographical areas; any changes in the Matsushita Group’s financial and operational position or business environment due to its business restructuring; current and potential, direct and indirect trade restrictions imposed by other countries; and fluctuations in market prices of securities and other assets in which the Company primarily belongs.Matsushita Group has holdings, as well as future changes or revisions to accounting policies, or accounting rules.

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PART I

Item 1. DescriptionIdentity of BusinessDirectors, Senior Management and Advisers

GENERALNot applicable

Matsushita Electric Industrial Co., Ltd. (hereinafter, unless the context otherwise requires, “Matsushita” or the “Company” refers to Matsushita Electric Industrial Co., Ltd.Item 2. Offer Statistics and its consolidated subsidiaries as a group) is one of the world’s leading producers of electronic and electric products.Expected Timetable

The Company was incorporated in Japan on December 15, 1935 under the laws of Japan as Matsushita Denki Sangyo Kabushiki Kaisha as the successor to an unincorporated enterprise founded in 1918 by the late Konosuke Matsushita. Mr. Matsushita led the Company with his corporate philosophy of contributing to the peace, happiness and prosperity of mankind through the supply of quality consumer goods. The Company’s business expanded rapidly with the recovery and growth of the Japanese economy after World War II, as it met rising demand for consumer electric and electronic products, starting with washing machines, black-and-white television sets (TVs) and refrigerators. Matsushita continued to grow during the following decades by expanding its product range to include color TVs, hi-fi components, air conditioners, video tape recorders, industrial equipment and information and communications equipment, as well as electronic components. Overseas sales and production expansion were also significant factors for the growth in these decades.Not applicable

Matsushita currently offers a comprehensive range of products, systems and components for consumer, business and industrial use based on sophisticated electronics and precision technology. Most of the Company’s products are marketed under “Panasonic,” “National” and “Technics” brand names, with some of its subsidiaries using brand names such as “Quasar,” “Victor” and “JVC.”Item 3. Key Information

In the 1990s, Matsushita placed increasing emphasis on technological development and the use of advanced electronics technology in every phase of life, thus steering the Company to achieve further growth in the next century. In particular, the Company has been expanding its development activities in such areas as next-generation audiovisual (AV) equipment, multimedia products, and advanced electronic components and devices, many items of which incorporate digital technology. Its current priority product areas include digital television systems, semiconductors, mobile communications equipment, optical discs and display devices, all of which form the basis for growth in the evolving digital networking age.A. Selected Financial Data

In December 1990, the Company acquired MCA INC. (MCA), a leading U.S. entertainment company, for approximately U.S.$6.1 billion.

In May 1993, the Company and N.V. Philips’ Gloeilampenfabrieken, now Koninklijke Philips Electronics N.V. (Philips), terminated their joint venture company, Matsushita Electronics Corporation (MEC), and the Company acquired Philips’ 35% equity share in MEC for 185 billion yen, thus making MEC a wholly-owned subsidiary.

In June 1995, the Company sold an 80% equity interest in MCA, now named Universal Studios, Inc., to The Seagram Company Ltd. for approximately U.S.$5.7 billion, leaving the Company with a minority interest.

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In April 1997, the Matsushita parent company established a new organizational structure, setting up four internal divisional companies — responsible for AVC (audiovisual and computer products), home appliances and household equipment, air conditioners, and electric motors — by grouping a majority of its some 50 product divisions. This step was taken in order to facilitate strategic planning, effective decision making and more efficient allocation of resources across a broader range than that afforded by each single product division.

Notes:		1.		Dividends per share reflect those paid during each fiscal year. The dollar amounts of the dividends per share have been computed at the exchange rates prevailing on the respective payment dates.
		2.		Beginning in fiscal 2001, the Company adopted Statements of Financial Accounting Standards (SFAS) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and accordingly, prior year figures have been restated to reflect this change.
		3.		Fiscal 1999 and 1998 net income represent amounts after subtracting the impact of approximately 42 billion yen and 28 billion yen, respectively, attributable to adjustments of net deferred tax assets to reflect reductions in Japan’s corporate income tax rate.

In March 1998, the Company announced a package of new management initiatives aimed at better sharing interests with shareholders. As part of this package, management implemented with approval at the annual shareholders’ meeting in late June 1998, repurchase of 50 million shares of the parent company’s common stock from the stock market for retirement, spending approximately 99 billion yen of retained earnings during fiscal 1999. At the same time, as an incentive to Board members and employees toward the enhancement of corporate value, the parent company introduced stock option plans for Board members and select senior executives, granting them rights to purchase 2,000 to 10,000 common shares each (similar option plans have been implemented in fiscal 2000 and 2001), and established a stock-price-linked remuneration plan, under which modest cash payments are to be offered once a year in addition to ordinary salary and bonus payments to employees manager-level or above (effective through fiscal 2001).

B.		Capitalization and Indebtedness
		Not applicable

In October 1999, EPCOS AG, a German electronic components joint venture of the Company and Siemens AG of Germany, had its initial public offering, listing its shares on German and U.S. stock exchanges. Following EPCOS AG’s public offering, Matsushita’s 45% (held by a subsidiary) and Siemens AG’s 55% holdings in EPCOS AG were reduced to nearly 12.5%, respectively. Matsushita realized a 59 billion yen gain from the sale of its shares in EPCOS AG.

C.		Reasons for the Offer and Use of Proceeds
		Not applicable

On April 1, 2000, the Company made Matsushita Refrigeration Company and Wakayama Precision Company wholly-owned subsidiaries, by means of share exchanges. As a result of the share exchanges, the Company issued a total of 16,321,187 shares of its common stock to shareholders of the respective companies.

D.		Risk Factors
		Matsushita Electric Industrial Co., Ltd. (hereinafter, unless the context otherwise requires, “Matsushita” or the “Company” refers to Matsushita Electric Industrial Co., Ltd. and its consolidated subsidiaries as a group), best known for its brand names, such as “Panasonic” and “National,” is one of the world’s leading manufacturers of electronic and electric products for a wide range of consumer, business and industrial uses, as well as a wide variety of components. Based in Osaka, Japan, the Company recorded consolidated net sales of approximately 6,877 billion yen for the fiscal year ended March 31, 2002 (“fiscal 2002”). Over the past eight decades, the Company has grown from a small domestic household electrical equipment manufacturer into a comprehensive electronic and electric equipment, systems and components manufacturer operating internationally. Of the fiscal 2002 net sales, approximately one-half was represented by sales in Japan, with the rest by overseas sales.
		Primarily because of the business areas and geographical areas where it operates and the highly competitive nature of the industry to which it belongs, Matsushita is exposed to a variety of risks and uncertainties in carrying out its businesses, including, but not limited to, the following:

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		Weakness in the Japanese and global economies has significantly reduced demand for the products of Matsushita, which trend may continue in the future
		The Japanese economy has experienced a prolonged recession since the early 1990s, which has become increasingly serious. In addition, the global economy has taken a downturn, concurrently with setbacks in the global information technology industry. These recessionary conditions have resulted in sluggish consumer spending and weakened corporate capital expenditures in many industries. For example, the markets for mobile communications equipment and components and devices for the information technology industry, on which Matsushita is substantially dependent for its growth, have been particularly hard hit. Due to these conditions and restructuring expenses under the Value Creation 21 plan, Matsushita incurred a significant net loss for the year ended March 31, 2002. Matsushita currently does not foresee a rapid turnaround in the Japanese or global economy in the near term. These conditions may continue in the short- to mid-term, thereby further negatively affecting Matsushita’s businesses.
		Matsushita’s mid-term business plan may not produce the expected results
		Largely as a result of the recessionary conditions in the Japanese and global economies described above, Matsushita incurred substantial losses in fiscal 2002. Furthermore, the business environment in which Matsushita operates has evolved so dramatically in recent years that Matsushita’s traditional business model, namely having each product division and subsidiary operate autonomously in each product area, does not necessarily provide as many advantages as it once did. In response to these problems, starting in April 2001, Matsushita has been implementing its mid-term business plan called Value Creation 21. The plan consists of two key elements: structural reforms with an emphasis on the pursuit of higher management efficiency for customer satisfaction, and the pursuit of a new growth strategy. Matsushita, however, may not be successful in achieving all of the goals set out in the plan or in realizing the benefits that it expects from implementing the plan because of external and internal factors as further mentioned below.
		The restructuring of Matsushita’s businesses may not bring the improved efficiency, cost reduction and growth that Matsushita aims for
		Under the plan, Matsushita has been restructuring its traditional, decentralized product division set-up by establishing several centers that provide manufacturing services commonly used by different product divisions; restructuring its organizations for semiconductors and display devices; integrating some of its manufacturing units in Japan and overseas; reforming its consumer sales and distribution structure in Japan; and implementing employment restructuring initiatives. As an additional business restructuring measure, Matsushita is implementing share exchanges with five of its majority-owned subsidiaries to transform them into wholly-owned subsidiaries of Matsushita, effective on October 1, 2002, followed by a major Groupwide reorganization (see Section A of Item 4 – Information on the Company). By integrating their management, Matsushita seeks to create a corporate structure in which it will be able to conduct its consolidated Groupwide businesses speedily and efficiently, and to achieve synergies excepted from such restructuring. Matsushita may not, however, be able to improve efficiency and reduce costs and realize growth through these measures, due to unexpected additional reorganization expenses, improper allocation of operational resources or other unpredictable factors.

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		Matsushita may not succeed in executing its growth strategies outside of Japan
		The Value Creation 21 plan includes expanding Matsushita’s businesses in markets outside of Japan. In many of these markets, Matsushita may face risks such as political instability, economic uncertainty, cultural and religious differences and labor relations, as well as foreign exchange risks. Matsushita may also face barriers in commercial and business customs in foreign countries, including difficulties in timely collection of accounts receivable or in building and expanding relationships with potential customers, subcontractors or parts suppliers. Matsushita may also experience various political, legal on other restrictions, including restrictions on foreign investment or the repatriation of profits on invested capital, nationalization of local industry, changes in export or import restrictions or foreign exchange controls, and changes in the tax system or rate of taxation in countries where Matsushita operates business. With respect to the products exported overseas, tariffs, other barriers or shipping costs may make Matsushita’s products less competitive. Finally, expanding its overseas business may require significant investments long before Matsushita realizes returns on such investments, and increased investments may result in expenses growing at a faster rate than revenues.
		Matsushita is subject to intense competition in areas in which it operates, and this may adversely affect its ability to maintain its gross margins
		Matsushita produces a broad range of products and therefore faces many different types of competitors, from large international companies to relatively small, rapidly growing, and highly specialized organizations. Matsushita may choose not to fund or invest in one or more of its businesses to the same degree as its competitors in those businesses do, or it may not be able to do so in a timely manner or at all. These competitors may have greater financial, technical, and marketing resources available to them than Matsushita has in the respective businesses in which they compete.
		Rapid declines in product prices may adversely affect Matsushita’s financial results
		While some of the factors that drive competition vary by product area, price is a factor relevant in substantially all of Matsushita’s businesses. For the year ending March 31, 2003, Matsushita expects prices in many product areas in which it deals to decline significantly or more rapidly than in recent fiscal years. Matsushita believes that this trend will affect its businesses especially those of its AVC Networks category, which contributed approximately 59% of Matsushita’s net sales for the year ended March 31, 2002, and in the area of Matsushita’s Components and Devices category, which contributed approximately 20% of its net sales during the same period.
		Matsushita may not be able to keep pace with technological changes and develop new products and services in a timely manner to remain competitive
		Matsushita may fail to introduce new products and services in response to technological changes in a timely manner. Some of Matsushita’s core businesses, such as consumer digital electronics and key components and devices, are concentrated in industries where technological innovation is the central competitive factor. Matsushita continuously faces the challenge of developing and introducing viable and innovative new products. Matsushita must predict with reasonable accuracy both future demand and new technologies that will be available to meet such demand. If Matsushita fails to do so, it will not be able to compete in new markets and this could adversely affect Matsushita’s financial results and growth prospects.

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		Matsushita may not be able to develop product formats which would prevail asde factostandards
		Matsushita has been forming alliances and partnerships with other major manufacturers to strengthen the development of product formats, such as next-generation home and mobile networking products and software systems. Despite these efforts by Matsushita, its competitors may be the ones who develop thede factostandards for future products.
		The alliances with, and strategic investments in, third parties undertaken by Matsushita may not produce positive results
		Matsushita develops its business through forming alliances or joint ventures with, and making strategic investments in, other companies, including investments in venture companies. Matsushita’s key alliances are described in Item 4. Matsushita’s reliance on the strategy of partnering with third parties is increasing. They are crucial to Matsushita’s goal of introducing new products and services, including those using digital network technologies. Matsushita does not, however, control these partners, who may make decisions regarding their business undertakings with Matsushita which may be contrary to Matsushita’s interests.
		Matsushita may be subject to product liability claims that could result in significant direct or indirect costs
		There is a risk that defects may occur in Matsushita’s products and services. Many of Matsushita’s products and services are for so-called “mission-critical” uses — where the consequences of defects would be severe — exposing Matsushita in some cases to greater risks than those posed by ordinary retail products. The occurrence of defects could make Matsushita liable for damages caused by the defects, including consequential damages. Negative publicity concerning these problems could also make it harder for Matsushita to market its products and services.
		Currency exchange rate fluctuations could adversely affect Matsushita’s financial results
		Matsushita is exposed to risks of foreign currency exchange rate fluctuations. Matsushita’s consolidated financial statements, which are presented in Japanese yen, are affected by foreign exchange rate changes. These changes affect Matsushita’s international business transactions and costs and prices of Matsushita’s products and services in overseas countries in relation to the yen. They can also affect the yen value of Matsushita’s investments in overseas assets and liabilities. Although Matsushita is taking measures to reduce or hedge against foreign currency exchange risks, foreign exchange rate fluctuations may hurt its businesses, financial conditions or results of operations. Most typically, if the yen strengthens, Matsushita’s domestically manufactured products become less attractive to foreign purchasers in terms of price.

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		Matsushita may not be able to successfully recruit and retain skilled employees, particularly scientific and technical personnel
		Matsushita may fail to recruit skilled employees, particularly scientific and technical personnel, which are limited in number. Matsushita’s future success depends largely on its ability to attract and retain certain key personnel, including scientific, technical and management personnel. Matsushita anticipates that it will need to hire additional skilled personnel in all areas of its business. Industry demand for skilled employees, however, exceeds the number of personnel available and the competition for attracting and retaining these employees, especially scientific and technical employees, is intense. Because of this intense competition for these skilled employees, Matsushita may be unable to retain its existing personnel or attract additional qualified employees in the future. If Matsushita is unable to retain skilled employees and attract additional qualified employees to keep up with its future business needs, this may adversely affect its business and results of operations.
		Matsushita is dependent on the ability of third parties to deliver parts, components and services in adequate quality and quantity in a timely manner
		Matsushita’s manufacturing operations depend on obtaining deliveries of raw materials, components, equipment and other supplies in adequate quality and quantity in a timely manner. Since the products Matsushita purchases are often complex, it may be difficult for Matsushita to substitute one supplier for another or one component for another in a timely manner or at all. Some components are only available from a limited number of suppliers. Although Matsushita believes that it selects only reliable suppliers, shortages could occur in critical materials due to interruption of supply or increased industry demand and may adversely affect Matsushita’s operations.
		Matsushita may fail to protect its proprietary intellectual property or face a claim of intellectual property infringement by a third party, and may lose its intellectual property rights on key technologies or be liable for significant damages
		Matsushita’s success depends on its ability to obtain patents, licenses and other intellectual property rights covering its products and product design and manufacturing processes. The proceedings for obtaining intellectual property protection can be long and expensive. Patents may not be granted on currently pending or future applications or may not be of sufficient scope or strength to provide Matsushita with enough protection or commercial advantage. In addition, effective copyright and trade secret protection may be unavailable or limited in some countries, and Matsushita’s trade secrets may be vulnerable to disclosure or misappropriation by employees, contractors or others. Competitors or other third parties may also develop technologies that are protected by patents and other intellectual property rights, which make such technologies unavailable or available only on terms unfavorable to Matsushita. Litigation may also be necessary to enforce Matsushita’s intellectual property rights or to defend against intellectual property infringement claims brought against Matsushita by third parties.
		Matsushita is exposed to the risk that its customers, including those to whom it has provided vendor financing, may encounter financial difficulties
		Matsushita may incur losses if some of its customers encounter financial difficulties. Matsushita provides vendor financing to its customers. As more businesses utilize vendor financing, Matsushita may also provide increased vendor financing in the future. In addition, many of Matsushita’s customers purchase products and services from it on payment terms that do not provide for immediate payment. If customers to whom Matsushita has extended or guaranteed vendor financing, or from whom it has substantial accounts receivable, encounter financial difficulties and are unable to make payments on time, Matsushita’s business, financial condition and operating results could be adversely affected.

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		Governmental regulations may limit Matsushita’s activities or increase its operating costs
		Matsushita is subject to governmental regulations in Japan and other countries in which it conducts its business, including environmental laws and regulations, governmental approvals required for conducting business and investments, laws and regulations governing the radio telecommunications businesses and electric product safety, national security-related laws and regulations and export/import laws and regulations, as well as commercial, antitrust, patent, product liability, consumer and business taxation laws and regulations. To the extent that Matsushita cannot comply with these laws and regulations, Matsushita’s activities would be limited. In addition, these laws and regulations could increase Matsushita’s operating costs.
		Interest rate fluctuations could adversely affect Matsushita’s financial results
		Matsushita is exposed to the risk of interest rate fluctuations, which, despite the measures taken by Matsushita to hedge a portion of its exposure to interest rate fluctuations, may affect its overall operational costs and the value of its financial assets and liabilities.
		The decrease in the value of Japanese stocks may adversely affect Matsushita’s financial results
		Matsushita holds Japanese stocks as part of its investment securities. The value of most of these stocks, however, dropped substantially over the past year due to the decline of the Japanese economy. For example, Matsushita recorded a loss of 93 billion yen in its results of operations for the year ended March 31, 2002 related to other than temporary declines in its investment securities.

Item 4. Information on the Company

A.

History and Development of the Company

GENERAL

The Company was incorporated in Japan on December 15, 1935 under the laws of Japan as Matsushita Denki Sangyo Kabushiki Kaisha (Address : 1006, Oaza Kadoma, Kadoma-shi, Osaka 571-8501, Japan. Phone : +81-6-6908-1121 / Agent : Mr. Shigeru Nakatani, President of Panasonic Finance (America), Inc.) as the successor to an unincorporated enterprise founded in 1918 by the late Konosuke Matsushita. Mr. Matsushita led the Company with his corporate philosophy of contributing to the peace, happiness and prosperity of mankind through the supply of quality consumer electrical and electronic goods. The Company’s business expanded rapidly with the recovery and growth of the Japanese economy after World War II, as it met rising demand for consumer electric and electronic products, starting with washing machines, black-and-white television sets (TVs) and refrigerators. During the 1950s, Matsushita expanded its operations by establishing mass production and mass sales structures to meet increasing domestic demand, while also creating subsidiaries, making acquisitions and forming alliances. During the 1960s, Matsushita expanded its overseas businesses, and its products started getting world-wide recognition.

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		During the global recession caused by the first oil crisis in 1973, Matsushita strengthened its structure and overseas business relations. The advent and popularity of the video cassette recorder (VCR) from the late 1970s enabled Matsushita to receive worldwide recognition as a global consumer electronics manufacturer. In the 1980s, Matsushita further worked to evolve from a consumer products manufacturer to a comprehensive electronics products manufacturer, expanding its business in the areas of information and communications technology and industrial equipment and components. Since the 1990s, Matsushita has been emphasizing technological development and the use of advanced technology in every phase of life. In particular, Matsushita has been expanding its development activities in such areas as next-generation audiovisual (AV) equipment, multimedia products, and advanced electronic components and devices, many of which incorporate digital technology.
		Matsushita currently offers a comprehensive range of products, systems and components for consumer, business and industrial use. Most of the Company’s products are marketed under the “Panasonic” or “National” brand names. The Company also uses the “Technics” brand name for certain hi-fi products, with some of its subsidiaries using other brand names such as “Quasar,” “Victor” and “JVC.” To form the basis for growth in the evolving digital networking age, the Company continues to emphasize technological development and the creation of new businesses, identifying several priority areas, such as digital network systems, mobile communications, data storage devices, environmental systems and key components and devices. The Company is also striving to develop new service-oriented businesses, such as systems solutions and “e-Net” business, as areas of potential growth over the mid-term.
		In June 1995, Matsushita sold an 80% equity interest in MCA (now named Universal Studios, Inc.), which the Company purchased in December 1990, to The Seagram Company Ltd. for approximately U.S.$5.7 billion, leaving the Company with a minority interest.
		In April 1997, the Matsushita parent company established four internal divisional companies – responsible for AVC (audiovisual and computer products), home appliances and household equipment, air conditioners, and electric motors – by grouping a majority of its some 50 product divisions, in order to facilitate strategic planning, effective decision making and more efficient allocation of resources across a broader range than that afforded by each single product division.
		In March 1998, the Company announced a package of new management initiatives aimed at better sharing interests with shareholders. As part of this package, management implemented, with approval at the annual shareholders’ meeting in June 1998, the repurchase of 50 million shares of the Company’s common stock, spending approximately 99 billion yen during fiscal 1999. At the same time, as an incentive to Board members and employees toward the enhancement of corporate value, the Company introduced stock option plans for Board members and select senior executives, and established a stock-price-linked remuneration plan, under which modest cash payments have been offered to employees manager-level or above in addition to ordinary salary and bonus payments.
		In October 1999, EPCOS AG, a German electronic components joint venture of the Company and Siemens AG of Germany, had its initial public offering, listing its shares on German and U.S. stock exchanges. Following EPCOS AG’s public offering, Matsushita’s 45% (held by a subsidiary) and Siemens AG’s 55% holdings in EPCOS AG were reduced to nearly 12.5%, respectively. Matsushita realized a 59 billion yen gain from the sale of its shares in EPCOS AG in fiscal 2000.

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		In April 2000, the Company made its majority-owned subsidiaries, Matsushita Refrigeration Company and Wakayama Precision Company, into wholly-owned subsidiaries, by means of share exchanges. As a result of the share exchanges, the Company issued 16,321,187 shares of its Common Stock to shareholders of the respective companies.
		In June 2000, Kunio Nakamura, new President of the Company, established the Company’s new three-year business plan, called Value Creation 21, which was formally implemented in April 2001. The Value Creation 21 plan was designed to take full advantage of the opportunities arising in the evolving digital networking society. Its objective is to transform Matsushita into a company that meets the needs of the 21st century through structural reforms and growth strategies with emphasis on enhancing growth potential, profitability and capital efficiency, thereby ensuring the Company’s continued contribution to society.
		During fiscal 2002, the Company implemented a series of structural reforms under the Value Creation 21 plan, such as the restructuring of its domestic consumer sales and distribution structure, management initiatives through the use of information technology, such as supply chain management (SCM), the selective integration of businesses and manufacturing locations, manufacturing reforms, such as the introduction of the cell-style production, the reform of the Company-wide R&D structure to concentrate on development in strategic product or core technology areas, and employment restructuring initiatives including the regional-based employee renumeration system and special early retirement programs.
		In April 2001, the Company absorbed Matsushita Electronics Corporation (MEC), its wholly-owned subsidiary, by merger to implement unified operational management in such key device areas as semiconductors and display devices. By establishing new internal divisional companies directly under the control of the parent company, namely the Semiconductor, Display Device and Lighting companies, the development, manufacturing and sales functions that were previously disbursed between Matsushita and MEC for each of these strategic businesses have been integrated.
		As an additional structural reform aimed at achieving new growth under the Value Creation 21 plan, on January 10, 2002, Matsushita and five of its majority-owned subsidiaries (Matsushita Communication Industrial Co., Ltd., Kyushu Matsushita Electric Co., Ltd., Matsushita Seiko, Ltd., Matsushita Kotobuki Electronics Industries, Ltd. and Matsushita Graphic Communication Systems, Inc.) announced preliminary agreements to implement share exchanges to transform these subsidiaries into wholly-owned subsidiaries of Matsushita, effective October 1, 2002. The definitive agreements concluded between Matsushita and each of these subsidiaries have been approved by respective companies’ shareholders’ meetings on June 27, 2002. Following the completion of the share exchanges, Matsushita intends to implement, early in January 2003, the major reorganization of four of the five subsidiaries and Matsushita’s related internal divisional companies and sales divisions into seven new operating entities. These seven operating entities are tentatively named: Panasonic AVC Networks Company, Panasonic Communications & Imaging Co., Ltd., Panasonic Mobile Communications & Networks Co., Ltd., Panasonic Automotive Systems Company, Panasonic System Solutions Company, Matsushita Ecology Systems Co., Ltd. and Panasonic Factory Solutions Co., Ltd. Through this reorganization, Matsushita seeks to reestablish its business domains as strategic units, thereby achieving higher management efficiency and accelerated growth on a consolidated Groupwide basis. The reorganization will be implemented with focus on the elimination of duplication of business lines and of counterproductive competition within the consolidated Group, the unification and concentration of research and development resources, and the establishment of a totally integrated operational structure from development and manufacturing to sales in each domain for full customer satisfaction.

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In April 2002, Matsushita and Toshiba Corporation established a joint venture company for the development, manufacture and sale of liquid crystal display (LCD) panels and next-generation display devices. Of the joint venture company’s initial capital of 10 billion yen, 60% was invested by Toshiba and 40% by Matsushita. The joint venture is expected to become one of the world’s leading LCD panel manufacturers, combining Matsushita’s fast-response LCD image processing technology, Toshiba’s technology of low-temperature polysilicon LCD panel manufacturing, and both companies’ experiences and technologies in the fields of consumer products, personal computers (PCs) and communication devices. The joint venture will start production of low-temperature polysilicon LCD panels in July 2002, to add to the existing LCD panel operations transferred from Matsushita and Toshiba.

CAPITAL INVESTMENT

		Recognizing that building advanced technologies, equipment and processes is essential to the cost-efficient and speedy manufacture of sophisticated electronic products and devices, Matsushita has been attentive in planning plant and equipment investment to achieve higher competitiveness and investment efficiency. Besides investment in production automation and energy-saving facilities, increasing emphasis has been placed on the expansion of facilities in such business areas as key components and devices, digital AV equipment and mobile communications equipment.
		Total capital investment (excluding intangibles) amounted to 338 billion yen, 504 billion yen and 309 billion yen for fiscal 2000, 2001 and 2002, respectively. The decrease for fiscal 2002 mainly reflects a severe business environment, as well as the fact that a series of major investment has peaked out in such key components and devices areas as semiconductors.
		For the current fiscal year ending March 31, 2003 (“fiscal 2003”), Matsushita expects its capital investment to decrease to approximately 240 billion yen as the Company places emphasis on higher asset efficiency, better utilizing existing facilities. Of the projected total amount, nearly 160 billion yen will be invested in facilities in Japan and the remaining 80 billion yen overseas. This investment will be funded primarily through internal sources.

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B.   Business Overview

SALES CATEGORIESBY PRODUCT CATEGORY

Matsushita is engaged in the production and sales of electronic and electric products in a broad array of business areas. The following table sets forth the Company’s sales breakdown by product categories for the last three fiscal years:

Matsushita is engaged in the production and sale of electronic and electric products in a broad array of business areas. The following table sets forth the Company’s sales breakdown by product category for the last three fiscal years;

Consumer Products

Consumer products is Matsushita’s traditional business area and the Company maintains a high competitive edge in Japan and overseas markets. Sales in this category, consisting of video and audio equipment and home appliances and household equipment, totaled 3,012 billion yen and represented 41% of total Company sales in fiscal 2000. Details of major products are as follows:

Note:

Effective fiscal 2002, the Company reclassified its former Consumer, Industrial and Components categories into four new categories: AVC Networks, Home Appliances, Industrial Equipment, and Components and Devices. Prior years figures have been restated to reflect this change.

		AVC Networks
		The creation of AVC Networks as a new category is Matsushita’s response to the new business environment created by the evolution of digital networks such as the integration of broadcasting and communications and of those with the Internet. Matsushita is seeking new growth, in particular, by enhancing the levels of networkable digital products and interlinking them to develop and promote convenient home networking environments that Matsushita expects will be centered around digital TVs.
		Video and Audio Equipment This category includes home-use videocassette
		Principal products in this sector include TVs, VCRs, camcorders, DVD players and recorders, (VCRs), camcorders, TVs, audio equipment, and newly expandingpre-recorded audio and video software. Matsushita maintains a leading market share in the domestic and overseas markets for a number of major products in this field. Over the last three fiscal years, however, sales in this category did not show marked growth due to such factors as slow consumer spending, especially in Japan, and intensified global price competition, notably in the area of low-end AV equipment. Instead, increasing emphasis has been placed on digital versatile disc (DVD) players. An established globalAV equipment and, most recently, on networkable AV equipment to make Matsushita a leader in VCRs,the approaching home networking age.

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		For TVs, Matsushita hasproduces a broad range of home VCRs including the S-VHS series with 5-times recording mode and the D-VHS, digital VHS VCR. In camcorders, the Company produces the VHS-C, compatible with VHS video players, and digital camcorder models along with hard disk editors for video editing, and video printers. - 6 - Matsushita’s broad range of TVs is designed to meet demand in all segments of the Japanesedomestic and international markets. The CompanyFor the mainstay cathode-ray-tube (CRT) TVs, Matsushita has shifted production of conventional CRT models from Japan to Southeast Asian and other overseas factories. Domestic production is currently expanding itsnow concentrated on flat-surface CRT models. Also, in recent years, Matsushita has gradually expanded production of high-picture-quality, high definition models, as well as flat-screen TVs such as LCD TVs and set-top boxes (STBs), by concentrating on flat-screenplasma display panel (PDP) TVs. In October 2001, Matsushita introduced a new range of LCD TVs with high picture quality, suchbuilt-in DVD players. Volume production of PDP TVs began in the summer of 2001 through a newly established manufacturing joint venture in Osaka with Toray Industries, Inc. Matsushita is also particularly active in the growing market for digital TVs. In the two years ended March 31, 2002, Matsushita captured a top share of domestic broadcast satellite digital TV and set-top-box (STB) production, including production on what is known as an original equipment manufacture basis, or OEM basis. Matsushita believes that this success was mainly attributable to its long commitment to research and development in digital TVs.
		To prepare for the launch in Japan of digital TV-based e-Net services in 2002, Matsushita, in cooperation with Toshiba, Hitachi and other Japanese companies, including broadcasting networks and content providers, established eP Corporation to develop a common platform as the progressive-scanning flat-surface T(tau)-series compatiblebasis for interactive TV, which is also linked with Broadcast Satellite (BS)the Internet, to substantially enhance the convenience of TV. The eP-platform will cover not only multiple digital TV broadcasting, set to begin in December 2000 in Japan. Overseas, the Company supplies TVsprogramming and data providing services but also stay-at-home shopping and banking, e-mail and Internet browsing and other interactive services via TV with an STB incorporating a hard disk drive (HDD). In June 2002, Matsushita started sales of STBs for U.S.digital TVs, which can accommodate broadcast satellite and communications satellite digital TV services and other interactive information services through the eP-platform, and which contain an HDD for storing large-capacity digital data. Furthermore, in view of the planned start in 2003 of digital terrestrial TV broadcasting in Japan and in Europe supplies interactive STBspreparation for the coming broadband communication age, Matsushita is developing more advanced Internet-protocol TVs.
		In the VCR and video camera area, Matsushita has been accelerating digitization, introducing digital VHS VCR decks and expanding its range of digital camcorders and digital still cameras, some of which incorporate the secure digital memory card mentioned below for memory storage and enhanced networking convenience. Of these, new models of digital still cameras, which benefit from the world-renowned optical technology of Leica Camera AG, achieved an immediate market success upon its introduction in the second half of fiscal 2002.
		As for DVDs, Matsushita offers a wide range of products from standard DVD players to British Interactive Broadcastingportable models equipped with LCDs. In June 2000, Matsushita launched DVD recorders, and has since strengthened this product line by introducing the industry’s most competitively-priced model in June 2001 and the industry’s first DVD recorder with a built-in HDD in December 2001. Matsushita also formed an alliance with Nintendo Co., Ltd. (BiB). The Companyand introduced a new DVD player which is also jointly developing, with OpenTV Corporation, multimedia hardware and software compatible with European interactive digital TV standards. Matsushita also produces liquid crystal display (LCD) TVs and plasma display TVs. In DVD players, Matsushita, a pioneer in this industry, boasts a product line ranging from standard to high-end progressive-scanning models, and expanded its portable LCD-equipped models by introducing a wide-screen LCD TV/DVD combination unit with enhanced picture quality. The Company will also launch DVD video recorders and DVD-Audio players this summer. Leading the DVD disc production industry, Matsushita continues to expand its facilities and has established joint ventures with Universal Music Group and Eastman Kodak Company. “Nintendo GameCube.”
		In the area of audio equipment, Matsushita produces a large variety of products, including such digital products as compact disc (CD) and Mini Disc (MD) players, radio receivers, CD radio cassette recorders tape recorders and portable headphoneMini Disc players, as well as radio receivers, tape recorders, portable headphone players, stereo hi-fi equipment and electronic musical instruments. Matsushita expanded its range of new audio equipment in recent years, with the launch of DVD-Audio players, and a series of products using the secure digital memory card, such as an ultra-compact portable headphone player. The Secure Digital (SD) Memory Card, an ultracompact mobilesecure digital memory card is a postage stamp-sized data storage device was developednow supported by more than 400 corporate members of the Secure Digital Association worldwide.

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		Information and Communications Equipment
		Information equipment includes products such as personal computers (PCs), PC displays, HDDs, CD-ROM drives, DVD-ROM and DVD-RAM drives, DVD-ROM and CD-R/RW combination drives, and other optical disk drives, copying machines and printers. CD-ROM and DVD-ROM drives are devices which permit users to read only the data contained on CDs or DVDs, while CD-R/RW and DVD-RAM drives permit users to read and write data onto them. Communications equipment includes products such as telephones, cellular phones, other mobile communications equipment, digital private branch exchanges and facsimile equipment. Products in cooperation with Toshiba Corporationthis sector also include other systems equipment, such as cable TV systems, car AV equipment, broadcast- and SanDisk Corporation. business-use AV equipment and systems, large-screen visual equipment and communications network-related equipment. This has been Matsushita’s fastest growth category during the last decade, led by mobile communications equipment and PC-related equipment.
		Matsushita is a worldwide leader in such business lines as optical disk drives, facsimile equipment, broadcast-use digital VCR equipment and airline in-flight AV systems. It also maintains a leading position in the Japanese cellular phone industry. For the last three fiscal years, however, this category’s business has shown some volatility due to such factors as increased price competition in the area of PC peripherals and the recent setback in global demand for information technology-related products such as PCs and cellular phones.
		With respect to PCs, Matsushita continued to upgrade its notebook models over the last several fiscal years. Matsushita launched an A5-sized notebook PC which can interface with charge coupled device cameras and cellular phones and, mainly for overseas markets, ruggedized notebook PCs built to resist shock, and thereby supporting such uses as police field activities in North America. This was followed in the year ended March 31, 2000 by the introduction of ultra slim models with added features such as wireless communication. In the year ended March 31, 2001, adding to its slim notebook series, Matsushita introduced an AV-oriented notebook PC that links easily to digital AV equipment to better meet the needs of the digital networking age. In the year ended March 31, 2002, Matsushita introduced what is currently marketing the wristwatch-shaped SD audio headphone player asworld’s lightest (960 grams) B5-sized notebook PC in Japan.
		In the first SD application and plansarea of PC peripherals, Matsushita strengthened its disk drive lineups. In HDDs, Matsushita continued to introduce upgraded models to meet the need for greater data storage capacity and faster processing speed. In the area of optical disk drives, Matsushita expanded its range of slim models for notebook PCs in the year ended March 31, 2000, and in the year ended March 31, 2001, introduced several new multiple disk drive models that gained popularity, including the industry’s slimmest and fastest DVD-ROM and CD-R/RW combination drive. In October 2001, Matsushita developed the world’s first 50-gigabyte blue laser rewritable dual-layer optical disc technology. These blue laser discs have more than 10 times the capacity of conventional rewritable optical disks.
		In the area of communications equipment, Matsushita has developed and introduced a number of new mobile communications products with focus on downsizing, ease-of-use and Internet connectivity, in recent years. In the year ended March 31, 2000, Matsushita launched NTT DoCoMo’s popular i-mode cellular handsets equipped with e-mail and Internet browsing capabilities.

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		Furthermore, in the year ended March 31, 2001, Matsushita began shipments of base transceiver stations for next-generation, wideband code division multiple access (W-CDMA) cellular phone services that NTT DoCoMo, Inc. commenced in the year ended March 31, 2002, followed by shipments of W-CDMA handsets, which permit the transmission of moving images and large volumes of data. W-CDMA is the world’s first third-generation wireless voice, image and data transmission services using an arrayadvanced technology which allows service providers to offer faster and higher quality services to their users. In August 2001, Matsushita, Matsushita Communication Industrial Co., Ltd. and NEC Corporation signed an agreement to form a development alliance to strengthen the global expansion of diversetheir technologies and products in third-generation mobile handsets, in particular W-CDMA products for the mobile multimedia market. In spite of this new trend, Matsushita’s sales of cellular phones were down for fiscal 2002, mainly as a result of sharp declines in demand for cellular phones especially in Japan and Europe, with additional negative effects of glitches found in certain models of the Company. To counter this unfavorable business environment, Matsushita launched new Internet-compatible slim folding cellular phones for NTT DoCoMo, with high picture quality, in January 2001 and in June 2002. These models are well-accepted and reestablishing Matsushita’s reputation in the Japanese cellular phone market.
		In the area of facsimile equipment, Matsushita marketed in April 2000 a new multifunctional model, featuring facsimile, copier, printer, scanner and telephone functions, and in February 2002 a color facsimile machine, compatible with the secure digital memory card, to meet the ever-sophisticated customer needs.
		In the area of car AV equipment, Matsushita has continued to develop advanced car navigation systems for the domestic market, as well as further promoting global expansion in car audio equipment. Building on its success of the world’s first car navigation system incorporating DVD, Matsushita extended its car navigation networking capabilities by launching NTT DoCoMo’s i-mode capable models in the SD Memory Card. This categoryyear ended March 31, 2000. Matsushita continues to launch upgraded car navigation systems, with recent introductions of a model that can receive mobile information services and a further advanced model with a built-in HDD capable of processing large volumes of data in an instant. In the related area of electronic toll collection (ETC) services, which were officially inaugurated in March 2001 as an integral part of Japan’s intelligent transport systems project, the Company began supplying not only the infrastructure equipment but also includes prerecorded videonew in-vehicle terminals for the ETC system.
		In the area of broadcast-use AV equipment and audio tapes and discssystems, Matsushita launched in such formats as VHS, DVD and CD. Matsushita intends to further strengthen its lineApril 2000 a series of digital networkable consumervideo electronic news gathering systems called DVCPRO HD, building on the success of its light, compact digital DVCPRO series and, in the year ended March 31, 2001, the Company supplied major broadcast satellite digital TV networks in Japan with conditional access systems and an electronic program guide, both key systems for broadcast satellite digital broadcasting. Matsushita is also solidifying its leading position in the global in-flight AV systems market by delivering AV systems with LCD monitors and personal multimedia systems that allow passengers to enjoy in-flight shopping from their seats.

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		Home Appliances
		Matsushita’s principal products to createin this category include home networks interconnecting them with each other and with external public information and communications networks. The role of Digital TVs and STBs together with DVD and SD products as home gateways and servers is expected to increase, forming a strong basis for future growth. Home Appliances and Household Equipment Matsushita’s vast array of home appliance products includes refrigerators, air conditioners, home laundry equipment (suchappliances, such as washing machines, and dryers),clothes dryers, vacuum cleaners, electric irons, dishwashers, microwave ovens, rice cookers and other cooking appliances, dishwashers, refrigerators, air conditioners, electric fans, air purifiers, electric and kerosene heaters and electrically-heated rugs. The line ofrugs; and household equipment, mainly comprisescomprising kitchen fixture systems, electric, gas and kerosene hot-water supply systems, and bath and sanitary equipment. This category also includes healthcare equipment, electric lamps, bicycles, and optical cameras and flash units, and fire extinguishers. units.
		Matsushita continues to leadhas a leading position in the Japanese home appliance industry, launching new technologicallymarket. In recent years, Matsushita responded to diversified customer needs by introducing products with high value-added innovative models. The latest examples includefeatures, such as a centrifugal-force washing machine for home use, featuring reduced drying time made possible through the world’s first dual air- and water-cooling technology, a compact rechargeable-battery-powered cordless vacuum cleaner employing a centrifugal-force dust collection system and a vacuum cleaner with separate modes for high-power and low-air exhaust operations. Matsushita introduced a series of new floor space-saving refrigerators that do not sacrifice inner capacity. Suchcapacity, followed by a refrigerator to employ separate cooling functions for the refrigerator compartment, vegetable drawer and freezer for higher energy efficiency. In the year ended March 31, 2002, furthermore, the Company launched Japan’s industry-leading refrigerator that uses hydrocarbon refrigerant, which eliminates the use of ozone-layer depletive refrigerants. In the same year, Matsushita introduced two innovative models feature high energy-efficiency levelsof air conditioners to meet the growing consumer interests in energy conservation and arehealthy lifestyles. One of them features an energy-saving technology achieving reduction of the power consumption by half compared with the Company’s model from ten years ago, and another one featuring the world’s first system that incorporates a perfect fit in Japanese kitchen fixture systems. The Company also strengthened its line of centrifugal force washing machines by adding a new series equippednegative ion generator with an automatic detergent feeding system. - 7 - Other recentelectronic dust collector.
		In addition to developing and introducing high-value-added products designed to stimulate the saturated appliance market in Japan, Matsushita has also been strengthening its business base by taking the lead in the newer, growth product innovations include the Company’s compact rechargeable-battery-powered cordless vacuum cleaner employing a centrifugal force dust collection system and a new space-saving compact dishwasher that fits even on a small Japanese kitchen countertop. In the household equipment area, the Company is meeting market needs by providing user-friendly products. Successful examples include easy-to-operate pull-down cabinet shelves, pull-outareas, such as dishwashers, and flame-freeframe-free induction heating cookers, as well as Matsushita’s energy-efficient air conditioners. From April 2000,cooking equipment and compact garbage processing units.
		Furthermore, Matsushita is further concentratingworking on the development of the following solution-oriented areas:new businesses to create enriched living environments healthcare, energyin the twenty-first century, offering products and food-related equipment and systems businesses. The Company is intentservices using digital networking technologies that focus on creating new business models,important issues such as automated electricthe environment and gas consumption inspection systemsenergy, health and healthcare, comfort and security and greater convenience at home. Activities in progress include the development of networkable home appliances, garbage recycling services for the food industry and home healthcare services. Industrial Products Industrial products is comprised of information and communications equipment and industrial equipment. This has been the Company’s fastest growth category For example, in the last decade, led by mobile communications equipmentyear ended March 31, 2002, Matsushita developed a new web-based tele-homecare system which allows patients to measure their vital signs and personal computer (PC) related equipment. However,doctors to access remotely the patient’s information. The Ministry of Health, Labour and Welfare of Japan officially recognized the system to be introduced for medical use.
		In May 2001, Matsushita entered into an agreement on a broad business alliance with Hitachi Ltd. in the last two years growth has slowed due mainly to the significant worldwide price declines in PC peripherals. Sales in fiscal 2000 totaled 2,757 billion yen for this category, representing 38% of total Company sales. Details of major products are as follows: Information and Communications Equipment The line of information and communications equipment includes information equipment,fields such as PCs, word processors, printers, copying machines, PC displays, hard disk drives, CD-ROM, DVD-ROMIC card-based solutions business and DVD-RAM drives; communications equipment, such as facsimile equipment, telephones, cellular telephones, other mobile communications equipmenthome networking appliances. As part of this alliance, the companies are co-developing home network systems linking home appliances with public infrastructures, which is intended to save energy and digital private branch exchanges;improve living standards. The companies are also joining hands on research and other systems equipment, such as CATV systems, broadcast- and business-use AV systems and equipment, large-screen visual equipment, communications network equipment, and traffic-related systems and equipment. Of these, Matsushita maintains a high competitive edge worldwide in particular lines of products, such as hard disk and optical disc drives, facsimile equipment, broadcast-use digital VCR equipment and airline in-flight AV systems, while also enjoying a leading position in the Japanese cellular phone industry. In the PC and related equipment field, Matsushita continued to improve its notebook PCs introducing ultraslim mobile models and adding features such as wireless communication. The Company strengthened its CD-ROM, DVD-ROM and DVD-RAM drives and hard disk drive lineup, developing upgraded models to meet the need for greater data storage capacity and faster processing speed. In the mobile communications field, Matsushita continued to maintain its leading share in the domestic cellular phone market with success in new lines including its NTT DoCoMo i-mode handsets equipped with E-mail and Internet browsing capabilities. Currently, Matsushita and NTT DoCoMo, Inc. are developing a service that will eventually allow users to download music to a SD Memory Card using mobile communications devices in Japan. Expanding its scope of operations, the Company has also begun preparations in both handsets and base stations for W-CDMA, the next-generation mobile communications system that will commence in the spring of 2001 in Japan. - 8 - In the broadcasting equipment field, Matsushita maintains a substantial share of the digital news gathering equipment market as it continues to launch innovative video camera recording and editing systems such as the DVCPRO HD (high-definition) series. The Company is currently exploring future business expansion with the launch of Japan’s BS digital TV broadcasting in December 2000, developing various new digital broadcast equipment centered on the Company’s advanced conditional access systems and electronic programming guide technologies and establishing ventures for creationdevelopment of new digital TV contents services with leading Japanese broadcasting companies. In business-use AV systems, the Company holds a large share of the in-flight AV systems global market and is continually increasing its surveillance cameras and Closed Circuit Video Equipment (CCVE) systems presence.environmental technologies for home appliances.

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		Industrial Equipment
		Matsushita’s product range of industrial equipment encompasses factory automation (FA) equipment, welding machines, electric power distribution equipment, commercialventilating and air conditioning equipment, vending machines and medical equipment. This category also includes car AV equipment, such as car audioIn addition, Matsushita is reinforcing its engineering services business, mainly for private enterprises and car navigation equipment. government agencies in Japan and overseas.
		In the area of FA equipment, Matsushita is an industry leader in electronic-parts-mountingelectronic-parts mounting machines, and major producer ofalso produces industrial robots and electronic measuring instruments. The Company reinforced its lineupBuilding on this strength to meet increasingly sophisticated customer requirements, Matsushita has launched innovative products in fiscal 2000 by concentratingrecent years, with a focus on smaller, lighter high-precision machinesmachines. Examples include a “Stud Bump Bonding” semiconductor mounting machine and introduced a new high-speed multifunctional chip mounter, as well as an innovativea laser processing machine to satisfy demand for ultrafine,ultra-fine production of high-integration circuit boards. The CompanyMatsushita has also added modular components mounters to solidify its mainstay range of parts-mounting machines in the year ended March 31, 2002. Concurrently, Matsushita introduced the world’s smallest and lightest fully digital carbon dioxide/metal active gas automatic welding machine. Matsushita also holds a competitive position in the market for DVD disc mastering and replication equipment. Matsushita is currently augmenting its efforts to become a total FA solutions provider offering not only equipment utilizingbut also comprehensive engineering services and related support.
		In the area of commercial-use ventilating and air-conditioning systems, Matsushita has been expanding delivery of its advanced authoringspecialty in-tunnel dust collection and disc bonding technologies. Car AV equipment suchventilation systems to Japan’s major expressways. Matsushita sources the manufacture of packaged air conditioners to Daikin Industries, Ltd. as part of an alliance entered into in November 1999 between the car navigation system are taking on an increasingly expanding role. To meet market needs,two companies. The alliance covers a broad range, also including consumer-use air conditioners in which Matsushita continueswill provide manufacturing cooperation to introduce more advanced car navigation systems, such as DVD-equipped models that feature networking capabilities including E-mail and Internet browsingDaikin, as well as interact with various new services such as mapjoint procurement of parts and traffic informationmaterials and Electronic Toll Collection systems. All the above are an integral partco-development of the development of the Intelligent Transport Systems (ITS) currently under way in Japan. environmentally-conscious products.
		Components Matsushita produces a wide range of electronic and electric components and devices. Devices
		Major products included in this category are semiconductors, general electronic components, display devices, electric motors, compressors and batteries, to support the Company’ssome of which are incorporated into Matsushita’s finished products and some of which are for sale to other manufacturers. Sales of components as a whole in fiscal 2000, excluding in-house consumption, totaled 1,530 billion yen, accounting for 21% of the Company’s overall sales.
		Recognizing that components and devices hold the key to innovation and advancement, as well as the competitiveness of finished products and systems in the digital networking age, Matsushita places significant priority on the development of electronic components’competitive components and devices technology and business. During and since the year ended March 31, 2001, business with special emphasisin this category has been adversely affected by setbacks in the demand from the cellular phone and other information technology-related industries. Given this adverse business environment, Matsushita implemented various structural reforms, including the centralization of manufacturing locations and the establishment of a new liquid crystal display (LCD) joint venture. In addition, to secure growth and profitability in this business category, Matsushita concentrates on semiconductorsthe development of proprietary “black-box” technologies and display devices. - 9the business expansion centered on the 120 strategic products that have the potential to achieve top global positions in their respective markets.

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The Company’s range of

		Matsushita’s semiconductors isare primarily made up of integrated circuits, (ICs), such as MOS LSIsmetal oxide semiconductor large-scale integration (LSI) circuits and bipolar ICs,integrated circuits, discrete devices and CCDs. The Companycharge coupled devices. Matsushita has been strengthening development of single-chip multifunctional LSIs, called System LSIs,system LSI circuits, which form the basis of digital-network relateddigital network-related equipment. Successful results in recent years included Media Core Processors,system LSI chip sets for DVD-ROM drives, MPEG-2 encoder chips, 32-bit microcontrollers with embedded DRAMs, single-chip decoder LSIs for digital TV receivers, anddynamic RAM, system LSI chip sets for DVD-ROM drives.digital TV tuners and the world’s first single-chip MPEG-4 multi-codec system LSI circuits. Matsushita is at the forefronthas also been a leader in optical pickup semiconductors for DVDs, CCDsDVD equipment, charge coupled devices for video camcorders, and gallium-arsenide power modules for cellular phones. The Company is currently working to develop 0.13 micron process technology in an alliance with Mitsubishi Electric Corporation for futureIn April 2002, Matsushita commenced production of new 0.13-micron system LSIs for use in digital networkable products. The Company maintains a broad spectrum ofand compound semiconductors at new facilities.
		Matsushita manufactures general components, encompassing electronic circuit components, printed circuit boards, transformers, power supply components, coils, capacitors, resistors, tuners, speakers, ceramic components, and various sensors. In fiscal 2000, the Company continued to introduceMatsushita has recently been focusing on smaller, more advanced components for equipment downsizing and performance improvement as well as developingimprovement. As part of this effort, Matsushita has expanded its production of compact multi-layer printed circuit boards of its own design and high frequency components for use in compact mobile communications equipment. In the year ended March 31, 2002, Matsushita augmented its range of specialty polymer aluminum electrolytic capacitors. Matsushita also developed cutting-edge ultracompact, high-capacitance products in the field of multiplayer ceramic chip capacitors and film capacitors. In areas related to digital networkable consumer products, Matsushita developed a surface-mounted circuit module for Bluetooth, a short-range wireless networking protocol, for digital home networking. protocol.
		In the area of display devices, Matsushita has recently added high-technology semi-stretched tension flat-surface CRTs and has further expanded its flat-surface CRTthis product rangeseries to include a model with a brightness level 20% higher than conventional models. Strategically, Matsushita ishas been concentrating production of flat-surface CRTs in Japan, while shifting production of traditional CRTs overseas. The CompanyIn the year ended March 31, 2001, Matsushita developed the world’s thinnest 32- and 36-inch flat-surface high-definition direct-view CRTs for broadcast satellite digital high definition TVs. Matsushita also focused effortshas been focusing on developing high-picture qualityhigh-picture-quality LCD devices with faster picture response and wider viewing angles. In April 2002, Matsushita established Toshiba Matsushita Display Technology Co., Ltd., a new joint venture with Toshiba. The Company isnew joint venture has succeeded to LCD operations of the two parent companies, and will further boosting itscommence manufacture of cutting-edge products, including low-temperature polysilicon LCD panels. Regarding plasma display panel (PDP)panels (PDPs), the market for which is expected to grow significantly in the mid-term, Matsushita boosted its product lineup with the developmentmarketing of 50-competitively-priced 50-inch and 60-inch37-inch units to add to its current 37- andexisting 42-inch models. model in 2001. Matsushita strengthened its manufacturing structure through a number of initiatives, including the commencement of production at a new PDP plant in China in December 2001.
		In the area of electric motors, Matsushita recently augmented its FA equipment motor lineup with the MINAS-A, a series of smaller, high-speed servomotors with greater energy efficiency compared tothan conventional models. AV and information and communications equipment motors lineups were also augmented with compact spindle motors for use in PC peripherals and DVD players andDuring the year ended March 31, 2002, the Company enhanced the lineup of vibration motors for cellular phones. Furthermore inphones and polygon mirror scanner motors for laser beam printers, while launching linear servomotors for industrial applications. In compressors, Matsushita is a world leader, offering those primarily for air conditioners and refrigerators.

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Matsushita is one of the world’s largest battery manufacturers, producing a comprehensive range of batteries ranging from manganese, alkaline, lithium, silver oxide and zinc air cells, to rechargeable batteries, such as lithium-ion, nickel metal-hydride, nickel-cadmium and sealed lead-acid batteries and storage batteries for automotive use, as well as various battery powered appliances. Among these, Matsushita has increased production of compact, high-performance batteries, such as the Company’s long lifelong-life alkaline batteries and lithium-ion batteries, has been expanding in recent years, as theythese batteries are increasingly used in compact electronic equipment. Matsushita is also at the forefront of nickel metal-hydride batteries for electric and hybrid electric vehicles.vehicles, production of which has been expanding, as they are increasingly installed in the new cars of the leading Japanese auto manufacturers. In fiscalthe year ended March 31, 2000, Matsushita launched the world’s thinnesta ultraslim (0.4 mm) manganese dioxide-lithium battery, known as the Paper Coin“paper coin,” for use in what are known as IC cards such as bank or credit cards. To strengthen its competitive position in the compact rechargeable batteries, Matsushita launched prismatic lithium-ion rechargeable batteries in the year ended March 31, 2001, and expanded its Osaka plant in the year ended March 31, 2002 to prepare for E-commerce.an extensive production increase in the future.

MARKETING CHANNELS

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SALES AND DISTRIBUTION

Set forth

The table below isshows a breakdown of Matsushita’s net sales breakdown by geographical markets:                                                     Yen (billions) Fiscal year ended March 31, 2000 1999 1998 Japan 3,698 51 % 3,752 49 % 3,891 49 % North and South America 1,384 19 1,513 20 1,458 19 Europe 906 12 1,019 13 949 12 Asia and Others 1,311 18 1,356 18 1,593 20                        Total 7,299 100 % 7,640 100 % 7,891 100 % area for the periods indicated:

		Sales and Distribution in Japan
		Domestic sales are handled primarilyor coordinated by 12several sales divisions organized according to the typetypes of customer, i.e., consumers,customers (consumers, corporate, government, manufacturing industry, and other respective industries,industries) in order to meet the specific and ever-diversifying needs of consumers and various industries.
		For the consumer market, Matsushita maintains the industry’s most extensive sales networks, supplying a large number of consumermany electronics and appliance retailers throughout Japan, and has also expandedexpanding sales to mass scalevolume retailers. In addition, the Company is currently attempting on a limited scale an Internet based
		Matsushita sells its products to non-consumers, such as manufacturers, business corporations, construction companies and governments, through its sales system, in which the Company will cooperate with retailers who handle product delivery, installationsdivisions, sales offices and after-sale services. subsidiaries or through outside agencies. Sales to corporate and government customers are centered on information and communications equipment, and sales to the manufacturing industry are focused on industrial equipment and components.

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With the exception

		In April 2001, Matsushita began implementing major reorganizations of light bulbsits domestic consumer sales and other inexpensive products, substantially all of Matsushita’sdistribution structure. As a first step, Matsushita restructured its corporate consumer products carry warrantiessales divisions, the sales functions of its product divisions and the advertisement division, into two new brand-name-linked marketing divisions: the Corporate Marketing Division for Panasonic Brand, which vary in duration from one to five years, in line withis primarily responsible for the normal practiceproducts of the industry. ServiceAVC Networks category, and the Corporate Marketing Division for National Brand, which is providedprimarily responsible for the products of the Home Appliances category. In respect of distribution through local consumer electronics and appliance retailers, in October 2001, Matsushita consolidated its 22 regional consumer sales companies throughout Japan into a single company. Matsushita’s sales for volume retailers will also be strengthened by expanding supply chain management. In addition, on October 1, 2001, Matsushita’s credit sales subsidiary and leasing subsidiary were merged into one company, Matsushita Leasing & Credit Co., Ltd. By implementing these reforms and by approved service companies which obtain replacement parts fromrevitalizing its domestic consumer sales and distribution operations, Matsushita intends to create an efficient structure that ensures speedy responses to customer needs and other suppliers. realizes a significant reduction in distribution costs and an increased market share.
		Overseas Activities
		Matsushita operates 222228 companies in 4445 countries outside of Japan, including five regional headquarters, 4349 manufacturing/sales companies, 9893 manufacturing companies, 4649 sales companies, 1213 research organizations and fivefour finance subsidiaries. International marketing of Matsushita’s products is conducted through the Company’s sales subsidiaries and affiliates and also through independent distributors. In addition, certain products are sold in foreign markets on an OEM basis and marketed under the brand names of third parties. The Company has been gradually strengthening overseas sales channels for industrial products and components aside fromas well as integrated systems products. These efforts are expected to broaden the scope of Matsushita’s overseas sales channels to add to the existing consumer products sales networks that Matsushita has in many countries and regions. The Company also implemented supply chain management (SCM), working with several overseas mass-scale retailers to raise global operational efficiency.
		Overseas sales including products manufactured outside Japan and those exported from Japan represented approximately 49%51% of the Company’s total consolidated sales in fiscal 2000. - 11 - 2002.
		In order to promote global business development and counter currency fluctuations, Matsushita has expanded and continues to expand its overseas production covering not only major consumer products, but also industrial products and components. Inin recent years, the Company placed emphasis on building and expanding manufacturing facilities in newly developing areas, such as China India and Eastern Europe, in addition to Southeast Asia. Specifically, Matsushita has been focusing on the strategy for China by strengthening the production capacity of its Chinese facilities for such products as well as Southeast AsiaDVD players, microwave ovens, compressors and Mexico. Matsushita’s currentcomponents, and by building a new Chinese facility for plasma display panels. The Company entered into a basic agreement with TCL Holdings Co., Ltd., a Chinese electronics leader, in April 2002, to develop collaborative relationship with each other in this growth market.
		Matsushita places emphasis is placed on advancingpromoting localization of development of products and technologies to enhance competitiveness of individual overseas manufacturing sites, as well as that of the entire Group regionally.sites. The Company is also reviewing the functions of its R&D, production and sales bases worldwide, by respective product categoriesintegrating and relocating, as necessary, to achieve optimum efficiency of Matsushita’s global operations.

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		Customers
		The largest markets for Matsushita’s productsMatsushita have traditionally been consumers and households.consumer products. However, since the 1980s, the proportion of sales to non-consumer customers, such as governments, commercial and industrial corporations and other institutions, including large customers such as electric and electronic equipment manufacturers, automotive manufacturers and various other machinery makers, has been rising as Matsushita places increasing emphasis on industrial and commercial products and electronic components. In the year ended March 31, 2000, sales of industrial products and components accounted for approximately 59% of Matsushita’s total sales, rising from 48% of the total (52% of total excluding MCA) in fiscal 1995. Matsushita’s business is not materially dependent uponon any single customer.

SEASONALITY OF BUSINESS

RESEARCH AND DEVELOPMENT

Matsushita considers research and development to be a key factor

		The Company’s main business has no significant seasonality in its success and essentialterms of sales or profits. However, when it comes to the achievement of its corporate theme: to provide utmost satisfaction to customers throughoutconsumer electronics market, normally the world through distinguished products and services and to contribute tofiscal third quarter is a peak because it falls in the progress and happiness of mankind. Under this theme, the Company has been committed to “R&D that creates next generation businesses, while at the same time supporting today’s and tomorrow’s products and businesses.” As part of this task, focus is directed towards the five priority areas: digital TV systems, semiconductors, mobile communications equipment, optical discs and display devices. Building on combined strength in these areas, Matsushita emphasizes the development of networkableyear-end sales season for consumer products that can be linked inside the home and with external public networks. Matsushita will also target a variety of mid-term growth areas, including broadband communications, Intelligent Transport Systems (ITS), education, healthcare, energy-related fields, Internet-related business and software. To make networkable consumer products and the Company’s mid-term growth areas a reality, Matsushita will aggressively pursue its research and development by closely coordinating programs and efforts at the corporate R&D centers and at each divisional research center. Principal corporate R&D centers include; the Advanced Technology Research Laboratories, which engages primarily in basic research aimed at developing advanced technologies to create new businesses looking toward the year 2010, the Multimedia Development Center, the Digital Network Development Center, the Optical Disk Systems Development Center, the Display Device Development Center, the Human Environment Development Center and the Corporate Semiconductor Development Division. The Corporate Production Engineering Division, which engages in development of new manufacturing technology, supports production activities at Matsushita’s domestic and overseas operating facilities. - 12 - The Overseas R&D Promotion Center supports and augments the Company’s global R&D activities, such as development of a common global platform for digital TV systems, strengthening the collaboration between corporate laboratoriesdurables in Japan and the holiday sales season in many overseas R&D centerscountries.
		Additionally, seasonal appliances, such as those basedair conditioners and refrigerators, have a different business cycle, in North America and Europe. At the divisional level, internal divisional companies and principal subsidiaries maintain their own research facilities and/or departments, engaged in specific R&D projects or engineering and design improvement in close cooperationline with the above corporate R&D centers, as mentioned above. Total expenditures for research and development amounted to 481 billion yen, 500 billion yen and 526 billion yen for the three fiscal years ended March 31, 1998, 1999 and 2000, respectively, representing 6.1%, 6.5% and 7.2% of Matsushita’s total net sales for each of those periods. The most significant recent results from Matsushita’s R&D efforts include; DVD products including DVD-Audio and video recorders, portable players, ROM and RAM drives with large data storage or recording capacity and high speed performance; a single-chip digital TV System LSI, which processes a large array of digital signals received in radio waves and is compatible with mostpractice of the world’s digital TV services; System LSI chip sets incorporatedrelevant Japanese industry, which starts from October and ends in DVD-ROM and RAM drives; an ultracompact mobile storage device called the Secure Digital (SD) Memory Card, jointly developed with SanDisk Corporation and Toshiba Corporation, for various use including electronic music distribution and AV data storage; Internet-compatible cellular phones and PHS-linked terminals, equipped with E-mail and Internet browsing capabilities;September. This does not have a compact home co-generation system using fuel cells; large printed circuit boards using environment-friendly lead-free solders, used inmaterial effect upon the Company’s VCRs.overall operation.

RAW MATERIALS AND SOURCE OF SUPPLY

CAPITAL EXPENDITURES

Recognizing that building advanced technologies, equipment and processes is essential to the cost-efficient manufacturing of sophisticated electronic products and devices, the Company has been attentive in planning plant and equipment investment to achieve higher competitiveness and investment efficiency. Besides constant investment in production automation and energy-saving facilities, increasing emphasis has been placed on expansion of such business areas ranging from digital AV equipment and mobile communications equipment to components and devices.

Total capital expenditures were 474 billion yen, 352 billion yen and 338 billion yen for fiscal 1998, fiscal 1999 and fiscal 2000, respectively.

Capital expenditures have declined over the past three years as the Company concentrates and focuses its resources on such strategically important areas as key components and devices including semiconductors and LCD devices, while implementing selective investment in other operating areas.

COMPETITION

The markets in which the Company sells its products are highly competitive in Japan, as well as abroad. Matsushita’s principal competitors, across the full range of its products, consist of several large Japanese manufacturers and a large number of smaller and more specialized companies. In particular categories of products it encounters additional competition from companies in the United States, Europe and Asia. The Company expects that competition will continue to be intense both in Japan and abroad.

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In addition, the recent advancement towards a borderless economy, has applied pressure to Japanese manufacturers, including Matsushita, in terms of price competition globally. To minimize the effects of these negative factors, the Company is devising various cost-reduction and efficiency measures to enhance competitiveness from a global perspective, such as increasing overseas production and shortening production and logistics lead time through the introduction of SCM, and also developing joint ventures and other cooperative agreements with overseas partners.

TRADEMARKS

Most of Matsushita’s products are distributed throughout the world under the “Panasonic” and “National” trademarks. Matsushita also sells a number of hi-fi products under the “Technics” trademark. Some of the subsidiaries’ products are sold under other trademarks, including “Quasar,” “Victor” and “JVC.”

PATENT LICENSE AGREEMENTS

Matsushita holds numerous Japanese and foreign patents and utility model registrations for its products and engages in mutual exchange of technologies with a number of Japanese and foreign manufacturers. Its technical assistance, or licensing, to other manufacturers is increasing year by year.

Matsushita is a licensee under various license agreements which cover a wide range of products, including audiovisual products, computers, communications equipment, semiconductors and other components. Matsushita has non-exclusive patent license agreements, among others, with Thomson Multimedia Licensing Inc. and Thomson S.A. covering a broad range of its products, including TVs, VCRs, CD players and CD-ROM drives. Matsushita has non-exclusive patent cross-license agreements, among others, with Texas Instruments Incorporated and International Business Machines Corporation, both covering semiconductors, information equipment and certain other related products. Matsushita Electronics Corporation (MEC), a consolidated subsidiary of the Company, has non-exclusive patent license agreements with Koninklijke Philips Electronics N.V. covering most of the items manufactured by MEC, including semiconductor devices, various lamps, cathode-ray and electron tubes and certain other products.

Most of Matsushita’s license and technical assistance agreements are for three- to ten-year periods, unless the agreements cover specific patents to be licensed therein, in which case they are normally for the life of the patent.

The Company considers all its technical exchange and license agreements beneficial to its operations.

RAW MATERIALS AND SOURCES OF SUPPLY

		Matsushita purchases a wide variety of parts and materials from various suppliers in Japan and abroad. The Company applies a multi-sourcing policy — being not dependent upon any one source of supply for any essential item. The Company has also been endeavoring to promote a policy of global optimum purchasing by selecting the bestmost qualified suppliers from all over the world and buying the most competitive parts and materials. Furthermore,Although prices of certain materials, such as metals, are volatile, the Company has managed to minimize the negative effects on its operations by maintaining favorable relations with suppliers and continuing a multi-sourcing policy.
		In an attempt to improve its operational efficiency and reduce parts and materials costs, Matsushita is centralizing in greater scale of its purchasing at its headquarters and at the internal divisional companies and subsidiaries levels. It is also reducing the number of its suppliers and standardizing parts and materials for common use throughout Matsushita.

PATENT LICENSE AGREEMENTS

Matsushita holds numerous Japanese and foreign patents and utility model registrations for its products and shares technologies with a number of Japanese and foreign manufacturers. Its technical assistance, or licensing, to other manufacturers has been increasing year by year.

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		Matsushita is a licensee under various license agreements which cover a wide range of products, including AV products, computers, communications equipment, semiconductors and other components. Matsushita has non-exclusive patent license agreements, with among others, Thomson Multimedia Licensing Inc. and Thomson Licensing S.A. covering a broad range of its products, including TVs, VCRs, CD players and CD-ROM drives. Matsushita has non-exclusive patent cross-license agreements, with among others, Texas Instruments Incorporated and International Business Machines Corporation, both covering semiconductors, information equipment and certain other related products. Certain internal divisional companies as successors to Matsushita Electronics Corporation, a former subsidiary now merged into the Company, have non-exclusive patent license agreements with Koninklijke Philips Electronics N.V. covering most of the items manufactured by such divisional companies, including semiconductor devices, various lamps, cathode-ray and electron tubes and certain other products.
		Most of Matsushita’s license and technical assistance agreements are for three- to ten-year periods, unless the agreements cover specific patents to be licensed therein, in which case they are normally for the life of the patent.
		The Company considers all of its technical exchange and license agreements beneficial to its operations.

COMPETITION

		The markets in which the Company sells its products are highly competitive. Matsushita’s principal competitors, across the full range of its products, consist of several large Japanese and international manufacturers and a number of smaller and more specialized companies. In certain categories of products it encounters additional competition from companies in the United States, Europe and Asia. The Company expects that competition will continue to be intense both in Japan and abroad.
		In addition, the recent advancement towards a borderless economy has applied pressure to Japanese manufacturers, including Matsushita, in terms of global price competition. To minimize the effects of these negative factors, the Company is currently establishingdevising various cost-reduction and efficiency measures to enhance competitiveness, such as innovating manufacturing processes through the use of information technology, increasing overseas production, and shortening production and distribution lead time through the introduction of supply chain management in cooperation with several overseas and domestic mass-scale retailers and cell-style production, as well as developing joint ventures and other cooperative agreements with domestic and overseas partners. Also, with the advancement of digital networking technologies, competition around the so-called “de facto” standard has become intense. In response, Matsushita has been strengthening its efforts for alliances with leaders of not only the electronics industry but also the software, devices, broadcasting, communications services and other industries.

GOVERNMENT REGULATIONS

Effective April 1, 2001, the Japanese government enacted the Law for Recycling of Specified Kinds of Consumer Electric Goods (the Recycling Law). The Recycling Law requires that consumers, retailers and manufacturers share the responsibility of recycling used TVs, refrigerators, air conditioners and washing machines.

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		To cope with requirements under the Recycling Law, Matsushita set up an Internet-based partseffective system that can utilize its existing infrastructure of recycling and materials procurement system on a nation-wide scale. Since suppliers are selected on the basis of a fairtransportation companies throughout Japan for collection and comprehensive evaluation, the Company enjoys good business relationships with them and the sourcing is properly assured. - 14 - ENVIRONMENTAL PROTECTION recycling activities. The Company actively promotes diverse environmental initiatives and harmonious coexistence with the global environment in every aspect of its business practices. Since establishingalso established the Matsushita Environmental Charter in 1991, the Company has emphasized theEco Technology Center Co., Ltd. not only for dismantling used products and recycling scrapped materials, but also for research and development of eco-friendly products, suchrecycling technology. Matsushita, as audio equipment and VCRs with industry-first lead-free solders, reduced the environmental impact from its manufacturing activities, and is establishing recycling systems. As part of Matsushita’s strong commitment toindustry leader in the domestic home appliance market, has been consistently working on environmental protection measures that meet or exceed standards set forth in the Company attained ISO14001 certification at more than 200 production sites globally. Accordingly, Matsushita not only observes relevant environmental laws and regulations throughout the world, but also established its own stricter guidelines for the reduction and proper management of chemical substances. Additionally, in fiscal 2000 the Company commenced a Green Procurement Campaign, in which Matsushita gives priority to eco-friendly suppliers and materials. In fiscal 1999, the Company spent approximately 2 billion yen in appropriate remedial actions for sites with any signs of contamination, including removal and purification of water and soil. Currently, the Company is not aware of any operational sites with serious environmental problems that may have a material adverse effect on its results of operations or financial position. Recycling Law.
		The Company is taking steps for compliancesubject to a number of other government regulations in Japan and overseas, but overall, the Company presently manages to operate its business without any significant difficulty or financial burden in coping with proposed Japanese used electric appliance recycling legislation, setthem.
C.		Organizational Structure
		In order to beginmaintain production, sales and service activities in the springbroad business areas as a comprehensive electronics manufacturer, Matsushita has traditionally operated under a decentralized divisional management structure with substantial delegation of 2001. However, it is difficultauthority to estimate related expenditures, due to uncertainties involved including the future status of the proposed legislation. Matsushita believes that capital expendituresdivisional companies and expenses incurred in complyingsubsidiaries, with the new legislation will not have a material adverse effect upon its results of operations or financial position. Nevertheless, the Company is aware that costs associated with more stringent future environmental regulations will increaseheadquarters focusing on Groupwide strategic functions, such as corporate planning, personnel administration, finance and is therefore placing a high priority on effective environmental cost management to achieve sustainable growth. EMPLOYEE RELATIONS Ascorporate communications, as well as corporate-level R&D, sales and marketing functions.
		Principal divisional companies and subsidiaries as of March 31, 2000, Matsushita had approximately 290,000 employees. Of the total, approximately 146,000 employees2002 are in Japan and approximately 144,000 outsideas listed below:

	(1)		Internal divisional companies of Japan, with a trend of overseas employees constantly increasing. Most regular employees in Japan, except management personnel, are union members, principally of the Matsushita Electric Industrial Workers Union, which is affiliated withCo., Ltd.:
			Name of internal divisional company
			AVC Company
			Home Appliance & Housing Electronics Company
			Air-Conditioner Company
			Packaged Air-Conditioner Company
			Motor Company
			Semiconductor Company
			Display Devices Company
			Lighting Company
			Factory Automation Company

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In addition to its manufacturing facilities, Matsushita’s properties all over the world include sales offices located in various cities with an aggregate floor space of approximately 7.7 million square feet, research and development facilities with an aggregate floor space of approximately 6.9 million square feet, employee housing and welfare facilities with an aggregate floor space of approximately 11.411.3 million square feet, and administrative offices with an aggregate floor space of approximately 17.019.0 million square feet.

As of March 31, 2000,2002, Matsushita leased approximately 12.217.0 million square feet of floor space, most of which was for sales office space.Substantially all of Matsushita’s properties are free of material encumbrances and Matsushita believes such properties are in adequate condition for their purposes and suitably utilized. During fiscal 2002, there was no material problem, regarding both the productive capacity and the extent of utilization of the Company’s properties.In terms of environmental issues, all of the Matsushita Group’s properties operate in compliance with governmental and municipal laws and regulations. Furthermore, the Company established a number of internal environmental guidelines which are stricter than those provided by the authority. In case any occasional non-compliance may take place, Matsushita takes immediate and appropriate actions to meet the regulatory requirements and to ensure current good utilization standards.For fiscal 2003, the Company will make a capital investment of approximately 240 billion yen, for the purpose of production of new products and enhancement of production capacity and efficiency with a focus on such areas as AV and information and communications equipment (approximately 85 billion yen), and electronic components and devices including semiconductors and PDPs (approximately 124 billion yen).The investments stated above will be funded mainly through internal sources.

Item 5.     Operating and Financial Review and Prospects

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Year ended March 31, 2002 compared with 2001

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Year ended March 31, 2001 compared with 2000

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